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Review of the week: Alliance & Leicester Premier Direct Account

Most people have never switched their current account but with inflation on the up and base rate still at an all-time low could the prospect of earning 6.0% with Alliance & Leicester’s Premier Direct current account be enough to get you to change bank?

The news that the annual rate of inflation rose again in January was not what many people, particularly those with savings, wanted to hear.

The Consumer Prices Index, the country’s official rate of inflation, rose from 2.9% to 3.5%, while the Retail Prices Index, which includes mortgage and housing costs, jumped from 2.4% to 3.7%.

Savers face the possibility that their cash won’t just earn less interest, it could actually lose value. You can read more about this in Clare Francis’ article ‘More misery for savers’.

Alliance & Leicester’s Premier Direct current account paying 6.0% is likely to be a popular choice among those looking to maximise their returns at this time of rising inflation and ultra-low interest rates. But is it the current account for you? Read on to find out…

What's the deal?

The Premier Direct Current Account pays a fixed rate 6.0% for 12 months on balances up to £2,500. You earn just 0.1% on anything above £2,500. After the first year, the rate drops to 1.00% for your entire in-credit balance.

While the deal will appeal to those who run their current account in credit, it also has a competitive overdraft. For the first year, there are no fees for arranged overdrafts up to £2,000. After that you’ll pay 50p a day to dip into the red but this is capped at a maximum of £5 a month.

New customers also qualify for a Premier Regular Saver that pays 6.0%.

To gain this great rate, you’ll need to save a fixed monthly amount up to £250 and no withdrawals are permitted, so you can’t access the cash for the first 12 months. However, this is a market-leading rate, making it a great place to stash the savings you can’t keep in your current account.

If you apply for a Premier Direct account before 7 March 2010 you can enter a prize draw to win tickets to the Italian Formula 1 Grand Prix.

Are there any catches?

While it’s a good idea to leave up to £2,500 in your Premier Direct account wherever possible in order to earn the great rate, you do need to use it as a current account rather than somewhere to save.

So, if you don’t pay in at least £500 a month, you could be asked to pay a fee. You have 11 weeks to move your salary, direct debits and standing orders to the account, or it could be closed.

If you want to take advantage of the Premier Regular Saver Account, you have to use A&L’s switching service for your current account in order to qualify.

It’s also worth noting that this is an online account, so there is no branch access.

Unfortunately, if you already have a current account with A&L, Santander, Cahoot or Cater Allen, you can’t open this account.

Verdict

If you are looking for ways to beat rising inflation, the Premier Direct Account is worth considering. Not only can you earn 6.0% on your current account balance for 12 months, you can also earn 6.0% on at least some of your savings too. You should review things after 12 months, however, when the in-credit rate drops.

You’ll benefit most from this account if you can afford to keep between £1,500 and £2,500 in your current account, and have money to invest in the Regular Saver.

If you don’t tend to have much cash in your current account at any one time, you might be better off with a different product. One popular option is the Halifax Reward Current Account, which gives you £5 a month as long as you pay in £1,000.

Other accounts pay you an incentive to sign up, for example the A&L Premier Current Account or First Direct’s 1st Account, both of which pay a £100 reward once you switch.

Top tip

The 6.00% is fixed for one year only, both on the Premier Direct account and the Premier Regular Saver.

After 12 months, the current account’s rate falls to 1.00% AER and the savings account switches to a variable rate product that's also likely to be paying far less. So if you want to be sure you’re on the best rate, you’ll need to compare current accounts and consider switching again.

Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.